Stock listing and financial flexibility

Abstract

a b s t r a c t a r t i c l e i n f o A stock listing usually reflects easy access to external equity financing. Although scant empirical evidence exists on the matter, the literature suggests that the enhanced standing towards creditors -which would result in easier access to debt financing -is an extra advantage of being publicly quoted. This paper tests whether a stock listing leads to more flexibility of debt financing, using a data set of listed and comparably large unlisted companies. The data reveals that listing mainly increases the flexible use of debt financing. The difference between listed and unlisted firms is most apparent when investment opportunities tend to arrive in low-cash-flow states. Furthermore, as the unlisted firms in the dataset are all large consolidating business groups, the results indicate that a group structure does not substitute for listing. The results are robust to different estimation methods.

Financial Flexibility and Investment Ability Across the Euro Area and the UK

“…Further, our results on privately held companies contribute to a recent line of studies that examine the differences between public and private firms' financial policies (Brav, ; Saunders and Steffen, ; Schoubben and Van Hulle, ; and Asker et al ., ;) and investment choices (Sheen, ; Gilje and Taillard, ; Mortal and Reisel, ; Asker et al ., ; and Lyandres et al ., ). Our paper adds new results to this growing literature.…”

Financial frictions and the cash flow – external financing sensitivity: evidence from a panel of Pakistani firms

“…The most of the previous existing studies such as Almeida & Campello (2010), Gracia & Mira (2014), and Schoubben & Van Hulle (2011) have explored the issue for developed countries only. However, when we review the literature for developing countries, we observe that researchers have not paid considerable attention on the external financing-cash flows relationship.…”

Financial leverage and competitive strategy of cross-listing firms

“…Telser (1966) indicates that a lower level of financial leverage enables a firm to sustain losses until it succeeds in excluding competitors. Indebted firms have periodic needs for refinancing, making them appear risky and thereby discouraging investors from approving their refinance requests (Bolton and Scharfstein, 1990; Fudenberg and Tirole, 1986; Schoubben and Hulle, 2011). Highly financially leveraged firms only have access to costly capital, and their abilities to respond to market competition are thus limited.…”

“…Capital structure and its relationship with firm value remain one of the most researched corporate finance issues (Gleason et al, 2000; Marchica and Mura, 2010; Schoubben and Hulle, 2011). Theories that provide the rationale for internal/external financing and debt/equity financing decisions have been controversial and always led to totally different predictions (Jensen and Meckling, 1976; Masulis, 1980; Modigliani and Miller, 1958; Myers, 1984; Myers and Majluf, 1984).…”